VAT was introduced in Bangladesh in 1991 as an alternative to sales tax. It has since become a major source of government revenue, contributing 27% of total revenue collection in 2005. VAT applies to goods and services with an annual turnover over 60 lacs and is charged at a rate of 15%. While VAT has increased tax collection, some argue it also increased inflation and businesses face issues with tax refunds and interstate credit. The document provides an overview of the history, mechanism, authorities and trends of VAT collection in Bangladesh.

1. Assignment on
“VAT IN PERSPECTIVE ON
BANGLADESH”

2. Prepared By…
Tahmina Tasmi Turin
ID No. : 1683
Registration No.: WUB 01/11/31/1683
Department of Business Administration
World University of Bangladesh

3. Prepared For…
Helaluddin Ahmed
Lecturer
Department of Business Administration
World University of Bangladesh

4. History of VAT
• Friedrich von Siemens, who
proposed it in 1918 as a
substitute for German turnover
tax.
• For its regeneration, the tax owes
much to Maurice Faure andCarl
Sumner Shoup. In 1954, the
value added tax system was
initiated by the then joint director
of the tax authority of France,
Maurice Laure.

5. VAT in Bangladesh
• In April 1979, the Taxation Enquiry
Commission (TEC) officially took up
the issue of introducing VAT in
Bangladesh as an alternate to sales
tax.
• Until 1982, sales tax was being
collected under the Sales Tax Act
1951, which was replaced by the
Sales Tax Ordinance 1982 with
effect from 1 July 1982.
• Final version of the Value Added
Tax Act was promulgated 31 May
1991 as a Presidential Ordinance
with eight sections. It was made
effective from 2 June 1991.

6. What is VAT?
•
Value added Tax a tax on which
the value of an article has been
increase stage of its production.
-The Oxford Dictionary
• Value Added Tax, popularly
known as ‘VAT’, is a special type
of indirect tax in which a sum of
money is levied at a particular
stage in the sale of a product or
service.

7. Types of VAT
Value Added Tax
(VAT)
Turnover Tax
(Under section 8 &
4 of the VAT Act)
Value Added Tax
(turnover minimum
60 lacs,percentage
is 15%)
Supplementary Duty
(10-500 percent under
section 7 of the VAT
Act)

8. Value Added Tax Features in
Bangladesh
•
•
•
•
•
General tax
Charge as percentage
Compusary for buyers and sellers
Zero rated for export
Exempted for cottage & agrobased industries
• Paying system
• Easy and transparent

9. Advantage & Disadvantages of VAT
Advantages of VAT
•
•
•
•
•
•
•
Encourages personal savings & investment
Revenue Potential
Act as supplementary tax
Cross audit feature
Less Litigation
Easier
Minimum Exemptions
Disadvantages of VAT
•
•
•
•
•
Revenue is lower than expected
Increase inflation
Refund of Tax
Increase in Investment
Not Credit for Tax paid on Interstate

10. Reasons Behind Introducing VAT in
Bangladesh
• Greater simplicity,transperancy
• Increase competitiveness of
industries
• Increase revenue
• Encourage better administered
tax system
• To avoid the problem of under
valuing
• To help in fiscal consolidation.

11. VAT Mechanism
VAT
Mechanism
The value added
: how to
measure it
Three
Alternatives in
VAT Computation
Three Types of
VAT BAse
VAT Calculation
Procedure

12. VAT Authorities
VAT Authority
Administrative
Judicial
National Broad of Revenue
Appellate Tribunal
Commissioner, VAT
Commissioner,(Large Taxpayer
Unit), VAT
DG (Central Intelligence Cell)
DG (Duty Exemption &
Drawback Office), VAT
Additional DG/ Commissioner,
VAT
Joint Commissioner Director, VAT
Deputy Commissioner/Director, VAT
Assistant Commissioner/Director,
VAT
Superintendent, VAT
Inspector, VAT
Commissioner
(Appeal), VAT

13. VAT Collection Trends
•
In FY2005, VAT revenues constituted 36% of the total tax
revenue and 27% of the total revenue collection, making it
to be the largest piece of the tax revenue pie. VAT
collection is growing very rapidly over the last decade. In
FY 2005 VAT achieved an impressive 23.7% growth.
FY200
1
FY200
2
FY200
3
FY200
4
FY200
5
VAT
Collection
61.32
69.6
80.71
85.75
106.05
Growth in
VAT
Collection
13.6
13.5
16.0
6.2
23.7
VAT
collection
as
percentile
of total
revenue
25.4
25.2
25.9
24.2
27.1
Total
revenue
receipt
241.7
276.7
311.19
354
392

14. Conclusion
• The Bangladeshi VAT has been in
force now for nearly 18 years. After a
slow start the number of registered
taxpayers has significantly increased
and the VAT has become a significant
contributor to government revenue.
• However, some of the states are still
attempting to push forward the
deadline as this will allow all states to
effect the transition to VAT at the same
time. This will also provide some more
time to the central government to
amend central sales tax act.